Athens Digest 19.06.2019

• Greece shoots past budget targets, helped by airport deal, bond-profit payout

• Bond yields tumble further on Draghi announcement, election boost

• Greek banks on ‘recovery track’ BoG report finds

• Tsipras urges EU to consider punitive measures against Turkey over East Med dispute

# Greece has outperformed budget targets for the first five months of the year, helped by revenue from an airport concession and the payout of bond profits under a debt relief programme. Finance Ministry data showed that the January-May deficit was EUR 1.758 billion, against a target of EUR 4.050 billion. The primary surplus was EUR 918 million against the deficit target of a EUR 1.447 billion deficit and a primary surplus of EUR 853 million for the same period last year. The boost was provided thanks to a EUR 1.121 billion extension of concession rights at Athens International Airport and a EUR 644 payout in bond profits (ANFAs) in May. Net revenues were EUR 20.187 billion, or 14.4 percent above target. Spending, however, also came in above target largely due to pension increases announced before the European and local government elections last month.

# Government bond yields have hit new lows as investors remained driven by the early general election and the Europe-wide impact of comments by European Central Bank President Mario Draghi signaling the willingness for additional stimulus. The yield of Greece’s 10-year government bond fell to 2.555 percent, and to 1.394 percent for the 5-year bond. Elsewhere in Europe, yields also fell sharply, and France’s 10-year-bond dipping into negative territory.

# Greece’s central bank says the country’s lenders are on a “recovery track” but stressed the need for stronger efforts to reduce non-performning loan volumes. In a report for 2018, the Bank of Greece said the volume of non-performing and distressed loans reached at EUR 81.8 billion, 45.4 percent of the total  by the end of last year _ an improvement from the EUR 94.4 billion, 47.2 percent share, at the end of the previous year (report in Greek, here)

# Prime Minister Alexis Tsipras called on European Union leaders to take action against Turkey amid an escalating dispute over natural gas drilling rights off the coast of Cyprus. In a telephone conversation with European Council President Donald Tusk, Tsipras reportedly said EU members should “unambiguously condemn illegal actions” carried out by Ankara. EU leaders are expected to consider the issue when they meet in Brussels on June 20-21. But ministers as a general affairs council yesterday sharply criticized Turkey’s intention to drill for gas off the Cyprus coast. “The Council expresses serious concerns over Turkey’s current illegal drilling activities in the Eastern Mediterranean and deplores that Turkey has not yet responded to the European Union’s repeated calls to cease such activities,” it said in a statement. “The Council underlines the serious immediate negative impact that such illegal actions have across the range of EU-Turkey relations.”

On our Radar: Innovation Rank
Greece has improved its innovation performance, but still ranks 20th in the European Union. The EU’s Innovation Scoreboard for 2019 showed that Greece achieved made the second best improvement 2011 and 2018, with a 20.2 percent performance boost, second to Lithuania’s 25.7 percent. Finland and Sweden lead the rankings, while Romania and Bulgaria were ranked last. The ranking system was created to help the EU expand its innovative capacity and better compete in world markets. Per sector, Denmark led for human resources, Luxembourg for attracting research, France for financial support, Germany for business investment, Portugal for innovative SMEs, and Malta for intellectual property.